Sector closes higher but down 22% for the quarter

Bankrupt Aloha cancels passenger service

SAN FRANCISCO (MarketWatch) -- Airline stocks closed higher Monday, with a steep drop in crude-oil prices half way through the session lifting the sector from an earlier tumble following news that Aloha Airlines was shutting down its passenger service.

The Amex Airline Index
XAL, -0.43%
rose 2.5% to close at 26.73 points, with 11 of the index's 14 components finishing in positive territory. The move left the index with a 22% decline for the first quarter, extending a 23% drop in the fourth quarter of 2007.

The index is down 49% from a year ago, clobbered by soaring fuel costs and a slumping U.S. economy. While crude for May delivery fell Monday nearly 4% to just under $102 a barrel on the New York Mercantile Exchange, the front-month crude contract is up 54% from where it stood a year ago.

ExpressJet Holdings
XJT
led percentage gainers Monday, up 6.5% to $2.63 a share, nearly matched by a 6.4% rise for JetBlue Airways
JBLU, -1.48%
to $5.80 a share.

Legacy carriers fared well, with all but Delta Air Lines finishing in positive territory. Delta
DAL, -0.56%
shed a penny to close at $8.60.

Brazilian airline Gol Linhas Aereas Inteligentes SA
GOL, -2.46%
posted the biggest decline of the group, down 7.5% to $14.89 a share after its cut its 2008 profit outlook and seat-occupancy forecast.

Elsewhere, bankrupt Aloha Airlines called it quits, canceling all regularly scheduled passenger flights from March 31 after failing to find a buyer for its passenger business. The privately-held company plans to continue operating its charter and cargo services. See full story.

Despite concerns that soaring fuel costs and a weaker economy are pinching airlines, Calyon Securities analyst Ray Neidl issued a report Monday saying the sector still has sufficient liquidity, at least for the time being.

"Our liquidity analysis for the major airlines stress-tested the impact of oil prices at a range of prices $20 a barrel above and below our current forecasts of $100 a barrel for 2008 and $95 a barrel for 2009. We found that all the airlines would survive 2008, but cash levels would be at alarming levels for a majority of carriers if current trends continue through 2009," he wrote.

Neidl said that the carriers best positioned to weather the storm are Delta and Northwest Airlines Corp.
NWA
due to progress made during their recent restructuring while in bankruptcy, and Southwest Airlines Co.
LUV, +0.11%
which continues to enjoy an advantage over rivals due to its aggressive fuel-hedging program and low debt levels.

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